We first discussed Secure Choice plans back in March of this year. At the time, Congress was moving forward with repealing Obama-era regulations that would have made it easier for states to establish these plans. Unfortunately, Congress passed and President Trump signed legislation to repeal those regulations. However, that did not end Secure Choice programs- far from it. The National Conference of Public Employee Retirement Systems (NCPERS) released a new report in August assessing the current landscape for Secure Choice programs in the states.
“Secure Choice” is a catch-all name for a number of private sector retirement savings plans that have now been adopted by nine states. The Secure Choice plan model that has been most widely adopted is based upon an automatic-enrollment IRA. Private sector workers, who do not already have access to a retirement plan through their employer, would be automatically enrolled in an IRA that is managed by the state. These workers would contribute a certain percentage of their salary toward their retirement savings and they would be able to take their savings with them when they changed jobs.
Illinois was the first state to pass legislation creating a Secure Choice plan, doing so in 2015. Oregon, however, is the first state to implement a Secure Choice plan. In addition to Illinois and Oregon, California, Connecticut, and Maryland have adopted Secure Choice plans. New Jersey and Washington State are establishing retirement plan marketplaces that will match small businesses with retirement plan providers. Just this year, Vermont became the first state to pass legislation to allow multiple small businesses to join together in multiple-employer retirement plans. Vermont’s plan is also unique because the retirement plan is a 401(k) plan, which means employers can contribute; in the IRA plan, only the employees are allowed to contribute.
Despite the efforts by Congress to slow down implementation of these plans, the states are moving ahead. Oregon launched their plan on July 1st of this year. In just two months, the small number of initial program participants have already saved $24,000. Illinois will begin implementing phase one of its program in 2018. Washington State plans to introduce its marketplace in 2017. Throughout 2018 and 2019, the other states will begin to open their plans and move forward into the next stages of implementation.
It is likely that as states begin fully implementing these plans, they will face legal and regulatory challenges as well as the inevitable hurdles of implementing any large-scale program like this. It’s critically important though that states continue to pursue ways to expand retirement security for working families. As polling this year has shown, the overwhelming majority of Americans- 88 percent– believe there is a retirement savings crisis facing the nation. With the federal government failing to take action or actually weakening retirement security, it is up to the states to find solutions for the retirement savings crisis.
To read the full NCPERS report on Secure Choice plans, click here.